WEST LAFAYETTE, Ind. – One of Purdue University President Mitch Daniels’ consistent selling points for the university’s pending acquisition of Kaplan University and its vast online reach has been the contention that it could be done without spending a dime of state taxpayers’ money.

Purdue officials insist that’s still the case, even as some insist a recently revealed stipulation set out by the U.S. Department of Education – one agency of several state and federal agencies that must sign off on the deal announced in April – could leave the state-funded university on the hook for Kaplan University’s debts and liabilities.

The Department of Education announced in September that its review found no reason, barring several conditions, to stand in the way of a deal between Purdue and Kaplan Higher Education. Purdue is looking to create what’s being called NewU, which the university says will bring an entirely new type of student under the Purdue umbrella.

The conditions, contained in a letter first reported this weekend by The Washington Post, had been under wraps since then.

In a Sept. 13 letter from Michael Frola, division director for the Department of Education, wrote that the federal agency would not approve the change in ownership of Kaplan University unless “NewU/(Kaplan University) has its debts and liabilities backed by Purdue” and the state.

Frola’s letter also said that Purdue and Kaplan “are not restricted in their ability to provide that (Kaplan’s current owners) indemnify the Purdue parties for any or all of those liabilities.”

Schultz said an agreement reached April 27 – one that still has some on campus and in higher education circles roiling – “clearly stipulates that Kaplan will indemnify Purdue” for all debts and liabilities collected before the deal is closed.

“To very clear: The Department of Education recognizes that the parties can agree – and in fact already have agreed – that Kaplan is responsible for pre-closing liabilities,” Schultz said. “For this reason and multiple others we’ve pointed out since April, the agreement is very protective of Purdue and shields Indiana taxpayers from financial risk.”

That hasn’t erased all questions about Purdue’s pursuit of the for-profit university.

In the deal, Purdue will pay $1 to Kaplan Higher Education, the parent company for Kaplan University. Kaplan, which will provide expertise in running NewU, would be in line to get 12.5 percent of revenue from the operation. When the deal was announced, Kaplan had 32,000 students, 2,462 faculty members and 15 campuses.

Daniels touted the move as an expansion of Purdue’s land grant university mission, reaching older students, veterans and others who might not otherwise be able to come to any of Purdue’s campuses. He also has imagined what Kaplan’s online reach might one day mean for current Purdue programs.

Daniels has been hailed by some as a visionary able to leapfrog the competition for an online base. But some among the Purdue faculty fretted over what the deal might mean for the university’s brand; how Kaplan’s current courses would blend with those offerings at Purdue; and how anyone would be able to keep tabs on NewU, considering that the state law that cleared the way for the Kaplan deal exempts the new entity from public access laws.

“The controversy over NewU goes to the heart of what it means to be a public institution,” said Bob Shireman, a former undersecretary of education who has been an outspoken critic of for-profit colleges, in general, and of Purdue’s deal in particular.

“(Former) Gov. Daniels is insisting that NewU be run by a for-profit company under a contract that never ends, that it be exempt from public meeting laws, exempt from public information and financial audit requirements, and exempt even from the laws that apply to tax-exempt nonprofit organizations,” Shireman said. “If being public does not mean public responsibility and accountability, what makes NewU public?”

State Sen. Brandt Hershman, R-Buck Creek, helped clear the way for the Kaplan deal this spring by getting language into the state’s two-year budget that gave permission for Purdue to operate NewU as a non-profit entity that wouldn’t rely on state tax dollars.

On Monday, Hershman hadn’t had time to review the Department of Education’s stipulations and whether the Kaplan deal would leave the General Assembly and Indiana’s taxpayers at risk. But as he did during the General Assembly session, when details were still being sorted out privately between Purdue and Kaplan, Hershman said he was confident in Daniels.

“I do have faith in Purdue and President Daniels’ ability to negotiate a deal, because I’ve seen it firsthand in the past and it’s been very well handled,” Hershman said. “He’s got a track record.”

Schultz said the Kaplan deal already had been reviewed and approved by the Indiana Commission for Higher Education – “the body that’s tasked with safeguarding the interests of Hoosier taxpayers.”

“Indiana taxpayers never even enter the picture,” Schultz said. “We fully expect Purdue NewU to be self-sustaining, but if Purdue ever would be called upon to backstop a NewU financial responsibility, it would be covered with resources other than state appropriations.”

NewU needs to clear one more regulatory step, when it goes through a review by the Higher Learning Commission, which accredits colleges and universities in 19 states, including Indiana. The commission is expected to do site visits with Purdue and Kaplan in late October, with a hearing in February.